By Mike Psenka, CEO, Moovila
When Elon Musk took over Twitter, he promptly fired half of the workforce, citing cost cutting as the main reason. Others claimed it was because Musk got his feelings hurt when engineers criticized him. Some believed it was because he didn’t understand that institutional knowledge is a key asset in modern companies.
There were lots of theories.
None of them interested me until I read that he tried to rehire many of the people he had let go. For me, that’s the sort of clue that solves the mystery. It tells me that the company was operating without a single source of truth.
Musk is known for liking efficiency in everything from manufacturing to meetings. But firing people and then attempting to bring them back because you realize, after the fact, that you need them is not efficient. It’s expensive and exposes the company to risk. That he did so is an indication to me that Twitter did not have a system that would allow it to forecast the necessary resources the company needs to execute essential business functions.
I believe that knowing your company’s baseline when it comes to operating resources – especially when those involve skilled people – is essential knowledge. It is difficult to make necessary decisions quickly and intelligently without it.
It surprises me, though, how many companies operate without this knowledge. I see it often. And firing people and later realizing you needed them is a common symptom of this ailment.
What you look like as bare bones
Knowing what your company looks like as a (functioning) skeleton requires some zero-based budgeting. I know these numbers for my business. I know the absolute minimum – in terms of people – it takes to function.
If I go too low, there's no point in having a business. Stuff breaks and we can’t answer calls, support customers, build new features, or sell what we make.
I know the bare bones number for my company is less than the number of people we have today. I don’t want to go to that level but knowing the baseline is important to many decisions I might have to make. I need to know how many people – and in what departments – we absolutely must have before it's too painful to exist.
That baseline is not where anyone wants to operate. Ideally, you would operate at a level above that, even during desperate times.
Seasonal retail businesses tune into this number and can grow and shrink their workforce without creating disasters. But when you look outside those types of companies, it can be difficult to know that perfect zero-based budget number.
Without it, you might let go of people from the wrong departments or who do essential tasks.
The smartest people fail at this math
I talk to a lot of businesses. And when I ask leaders how confident they are in their headcount and resource forecasting, I find the bigger the business, the lower their confidence.
Twitter is run by some of the smartest people in the world. Yet it was likely operating without this fundamental, foundational information about its workforce.
Do you know the absolute minimum – for each role – your company must have before cuts punish your business?
If not, (and without that data), you have to rely on the estimations of your leadership team and trust your gut for critical decisions.
End to end work design
Our brains have a poor ability to estimate accurately. Gut instincts work well on localized sets of data or processes we know well. An art curator, say, with thousands of hours of experience can look at a painting and know if it’s a fake. But a business with a large workforce and disparate units and departments is too complicated. No human can estimate something with so many complex moving parts.
To brace for this, leaders make broad cuts across the business with the idea of sharing the pain. Not all those decisions will be wrong. But there will be enormous mistakes. If you had access to detailed accounting and were able to do high-level mathematics to predict what would happen, you would quickly see those mistakes.
If you were captain of a sinking ship, for example, and were also experiencing a power shortage, would you reduce the electricity budget equally for every part of the ship? The ice cream maker in dining would get a 50% cut in power. The bilge that’s pumping the water takes the same cut. No. You can easily see that won’t end well.
Having a detailed understanding of your workforce – and your baselines – makes it possible for you to respond to a crisis with that kind of clarity.
Small organizations – like that ship – know where to cut because they can figure it out on the back of a napkin. When you have ten employees, it’s easy to know what people do what and in what boxes. But if your company is orders of magnitude larger, you need tools much more intelligent.
With the right resource management approach, you can create the same sinking ship/back of the napkin clarity for a massive enterprise. You could know – based on the work that needs to be done – how many people you need, categorized by role, at any given time.
The math to arrive here is complicated, as is the accounting, and – to make things more challenging – it’s no good unless you monitor is for change constantly.
That’s why I built artificial intelligence into our work management and design tools. These calculations are beyond the ability of any human (even those capable of running the most sophisticated companies in the world). But they are not beyond the ability of a computer running an AI dedicated to the task.
It's easy to make critical, company ending mistakes when you have to make fast decisions at this level. And while your company might not make the news if you have to step down because your gut reactions were wrong, it would nonetheless be easier to avoid making those mistakes at all.
Mike Psenka is the CEO and founder of Moovila, the leading AI work management platform that uses automation and a discreet math engine to give organizations the real-time answers needed to ensure success.